I like big blocks and I cannot lie.
That was the opening line from nChain CEO Jimmy Nguyen — whose company wants to make bitcoin spin-off bitcoin cash (BCH) the cryptocurrency of the future — on a panel (or more precisely, a man-el) last week at Exeter University. He was referencing Sir Mix-A-Lot’s early 90s classic Baby Got Back (NSFW music video here).
Thing is though, unlike Sir Mix-A-Lot and his pals, Nguyen and the rest of the BCH army aren’t doing so well on getting their hands on the big stuff they so lust after.
Bitcoin cash’s blocks — the bundles of transactions that are processed, hashed and then stored on the blockchain — aren’t actually very big at all. Although their maximum size is 8MB, they are currently on average only using one 160th of that capacity: around 50 kilobytes, according to industry data provider BitInfoCharts.
Thats because people aren’t really using bitcoin cash. It therefore seems a little odd that its developers have they will implement a fourfold increase in the maximum block size later today to 32GB, or around 640 times its current average.
Samson Mow, chief strategy officer at Blockstream — a company that’s funding bitcoin cash arch-enemy bitcoin core — summed up the strategy rather nicely with this tweet last week:
Bitcoin cash’s insistence on block-size expansion despite the lack of demand necessitating one is just the latest example of the sheer absence of reason in the crypto space, and also highlights the ideological and politicised nature of much of the decisionmaking. As financial blogger Frances Coppola pointed out in a post on Friday, the debate between the two bitcoin factions has become something more akin to a religious war than any kind of serious conversation over how best to develop the technology.
Bitcoin cash split away from the original bitcoin — which the BCH army calls “bitcoin core” so as to distinguish itself as the true “bitcoin” — in August last year, after a bitter row over how best to scale up the bitcoin blockchain so as to allow for more transactions. Both sides believe their version is the true fulfilment of pseudonymous bitcoin creator Satoshi Nakamoto’s original vision.
Although bitcoin cash was not adopted by the majority of the bitcoin network — and is therefore effectively an “altcoin” like dogecoin or litecoin — it does have some heavy-hitting backers, who believe in BCH with a zealous fervour. Those backers include the man once dubbed “Bitcoin Jesus”, Roger Ver, and Craig Wright, the man who said in 2016 he was able to prove he was Satoshi and then said he wasn’t, who also happens to be chief scientist at nChain.
But bitcoin cash’s main problem is the opposite of the one it is providing a solution to. It’s not suffering from too many transactions, which might necessitate a block size increase; it’s suffering from too few. There are more daily transactons in Dogecoin, a cryptocurrency based on a dog meme that was created as a joke, than bitcoin cash.
Here’s how the daily transaction numbers stack up for bitcoin cash versus dogecoin and bitcoin core, from data provider BitInfoCharts. (That’s bitcoin cash in red at the bottom, with about ten times fewer transactions than bitcoin, which has a maximum block size of 1MB, and which as we have written many times before, is itself also very rarely used as anything more than a means of speculation because of its multiple deficiencies as a means of payment.)
So little is bitcoin cash transacted, that one major exchange called OKEX decided to close trading in it last month, citing “inadequate liquidity”.
So why are bitcoin cash’s developers expanding its size?
Tim Swanson, founder of tech consultancy Post Oak Labs, told us the following:
Many within the bitcoin cash tribe have publicly promised its stakeholders they’d do it, so it’s part of their narrative. But at this stage … it’s just a marketing effort – they’re not changing the user experience. So it seems like a way of being able to thumb their noses at the tribe across the other side of the river valley.The only people who really cares about this specific issue – “censorship resistant” payments — is a small, clique of vocal tribal warriors that you see on social media. I don’t think the average consumer really cares, otherwise we’d see more demand for transactional usage and by most measures, that still doesn’t appear to be happening.
By convincing us that bitcoin cash is the internet currency of the future, its backers hope that its price will rise. As we have pointed out before, this is one of crypto’s most problematic contradictions — if you want it to be used as a currency to buy goods and services online with (totally legitimate ones of course), you can’t simultaneously treat is as an asset to HODL.
The crypto world still doesn’t seem to have grasped this. Shortly after making his Sir Mix-A-Lot reference, Mr Nguyen sought to reassure the attendees of the Exeter panel that the price of bitcoin cash would “stabilise” over time as it became more “usable”:
Right now people freak out because of the volatility, because the price isn’t really based on anything other than people wanting to get in knowing there’s only 21 million coins … not because [they’re] actually using it. So the the price right now is just speculative and we’re fighting for the long-term value of it that we think will stabilise the price. At a much higher number!
Confused? Us too.
Sell all crypto and abandon all blockchain – FT Alphaville
What’s up with @bitcoin? – FT Alphaville
When altcoin life imitates art – FT Alphaville
Busting the myth that bitcoin is actually an efficient payment mechanism – FT Alphaville
The Bitcoin collapses, charted – FT Alphaville
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